Kenya urged to seek external debt

May 25, 2009
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, NAIROBI, Kenya, May 25 – Kenya was on Monday advised to seek greater international lending to finance development projects.

The Convener of the Association of Professional Societies in East Africa, Felix Okatch, told Capital Business that the newly-released economic data – which revealed a reduced growth from 7.1 percent to 1.7 percent – points to the need for the government to source for external funding to supplement the country’s revenue base.

“All development projects can be catered for within the coming financial year. Now is the time for the country to borrow the cheaper international loans and invest in economic activities that will stimulate the economy,” he said.

The government has in the past boasted of ability to finance about 95 percent of its budget but the pundit pointed out that with tax revenue collection of about Sh500 billion and expenditures of close to Sh700 billion, the country cannot go without borrowing.

He said contrary to popular beliefs, international conditions are still favourable and thus the government should take advantage of them.

“During the G20 meeting in London, they recommended that developing countries should be given more loans through IMF and other agencies to improve their economies. We are also lucky because President (Barack) Obama is now at the White House and with the right reforms we can manage to get more loans from them. It is time for us to take more of those loans,” he emphasised.

Mr Okatch argued that the government should also fast track the privatisation program and divest its shareholding in more parastatals in order to improve capital flows.

He said that the country should also rely more on donor funding for its development projects such as putting up schools, health institutions and infrastructural development.

Pointing to the developed countries’ commitment to offer the Official Development Assistance where 0.7 percent of their Gross National Income is earmarked for poor countries, Mr Okatch said if honoured, this was enough to support projects that can have a big impact in the country.

“0.75 percent of say UK’s, Netherlands, Germany’s or Italy’s GDP is massive. If we targeted that and the money goes into specific projects, it would assist us in developing the road networks, power generation and telecommunication among others,” he said.

At the same time, the analyst said Finance Minister Uhuru Kenyatta should in the upcoming budget come up with measures to ensure the equitable and fair disbursement of devolved funds in the country.

This, he added was one way of supporting private sector growth at a time when the economy is facing enormous challenges.

He challenged the government to also speed-up the payment process to its suppliers and employ graduates in various sectors so as to ensure that money circulates and stimulates the economy.

Absorbing these people in sectors such as education and health, he argued, would not only create employment for thousands of youth but it would also help to increase the revenue base.

 “The government should employ these nurses and teachers from the training schools so that they can have incomes and have the multiplier effect of expanding the economy,” he added.

Mr Okatch said with all the challenges that the country is facing now, Kenyans would be watching keenly come budget day to see what measures the Finance Minister would take to streamline government’s operations. This he added could only be done by reducing recurrent expenditure in ministries.

“The way the coalition government and ministries came in, you cannot say they (ministries) should be reduced or changed. They are part of that arrangement. What can happen however is to reduce the expenses of each ministry,” he said referring to calls for a leaner Cabinet.

If all these measures are implemented, he reckoned, the economy could expand more than the projected two to three percent this year and eventually Vision 2030 could be achieved.

While acknowledging that the Vision was ambitious, he reckoned that it provides a platform for the country to review its successes and failures.

“It’s a framework that shows us to see where we are moving to. At 1.7 percent growth that we recorded last year, it shows that the vision is not on course but it has generated scenarios where we are looking at ourselves and asking, ‘what’ is happening in agriculture, tourism, manufacturing and what do we do about it,” he added.
 

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